Loss prevention expert Fraud scams bane of small business

June 30, 2010
| By Pete Daly |
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Anything fishy that surfaces at a small business and then ends up cashed or deposited at a Chemical Bank branch in Michigan will eventually find its way to Glenn Sweeney’s desk. Those fishy situations include the use of counterfeit checks and credit cards and bogus currency — all of which are the bane of small business.

“It’s absolutely on the increase,” said Sweeney, vice president and director of Loss Prevention at Chemical Bank. Based in Midland, it is the third-largest bank headquartered in Michigan, with 144 banking offices in 32 counties throughout the Lower Peninsula.

Sweeney said that compared to the scams of a generation ago, “the schemes that are going on today are magnified” in size and frequency because of the sophisticated electronic tools available everywhere in the world, and the extreme ease of reaching someone at random on the other side of the world.

“We have 20 cases (of fraud) a day,” said Sweeney, adding that Chemical Bank is by no means unusual in that regard. He said he spoke recently to an officer from a bank based in Indiana, and its daily average was “a little higher than we are.”

Payroll checks are the most frequent target of check counterfeiters, but some con games involve counterfeits of checks from well-known corporations that arrive spontaneously. This spring in Michigan, some people received checks that appeared to come from Allstate Insurance, enclosed in a letter announcing that the individual had won a large amount of money in a “consumers promotion drawing.” All the winner had to do was cash the check and wire the money somewhere to cover the taxes and delivery charges related to the “prize.”

Sweeney said many small businesses will cash a check for a customer, while banks and credit unions are much more careful. Chemical Bank has a mechanism in place for detecting counterfeit checks, but even then, he said, “we find anywhere from two to six a day that have made it through the system.”

Sweeney spends much of his time on the road. A lot of it is investigative work in which he is representing the bank or its customer in criminal investigations being conducted by law enforcement agencies including the FBI and Secret Service, and even U.S. Immigration & Customs Enforcement.

Other times, Sweeney is on an educational mission, meeting with businesses or civic groups to talk about the fraud threats out there and how to combat them.

“Instead of always trying to do detective work after the fact, we try to set up processes so that we’re preventing losses from occurring,” he said. “That’s why we have our meetings (with businesses), and I go out to talk to different groups and educate them.”

Sweeney, who is based in Midland, will be talking to the members of Grand Rapids Opportunities for Women at least once this summer, and he has spoken on two occasions to the West Michigan Hispanic Chamber of Commerce.

There was a time when it seemed that elderly individuals were the primary targets of scammers, but Sweeney said the banking industry is seeing a growing number of businesses being targeted.

“Crooks are trying to get in and take over their Internet banking,” said Sweeney. He said that type of fraud typically begins with the planting of a malware program on an employee’s computer via an attachment in an unsolicited email. Once the malware is in the system, it can log the employee’s keystrokes and provide that information to the criminals, who then replicate those key strokes in attempts to hack into an online bank account.

When the victim of fraud is a business, the ultimate loss often totals between $75,000 and $200,000, according to recent statistics Sweeney has seen.

At small businesses engaged in retail sales or services, the biggest losses Sweeney sees are usually related to fraudulent use of credit cards and counterfeit checks. “A lot” of small businesses will accept a credit card without asking for identification, Sweeney said. “I think because they want to get that person in and out. They don’t want to cause the person to become angry.”

His point is that ID should be required if the customer is a stranger. In one case that Sweeney helped investigate, a business client of Chemical Bank accepted several counterfeit credit cards before realizing they were fake and lost about $35,000 in goods and services.

There is no recourse for recovery of that type of loss, added Sweeney.

“That’s their livelihood. That’s cutting right into their bottom line,” he said.

“What we emphasize is: Know your customer. In fact, the U.S. Secret Service continually emphasizes that. Know your customer. Know who you are doing business with.”

Sweeney meets with the Secret Service whenever counterfeit money is detected at Chemical Bank. Recently, he turned over to them a counterfeit $20 bill that had been passed at a MacDonald’s restaurant in West Michigan. The Secret Service may be best known as the security force for the president, but that is just a sideline that started in 1894. The Secret Service was actually organized in 1865 to suppress counterfeit currency.

Sweeney said cases of counterfeit currency in Michigan aren’t increasing as quickly as other forms of fraud, but “they’re not getting any less.” He recently spoke to an Ottawa County sheriff’s deputy who told him there was counterfeit money passed in the Holland area during Tulip Time this year.

Counterfeit IDs are a very big business. Small businesses such as convenience stores are presented with a variety of IDs when someone wants to pay with a check or credit card. The IDs can include state ID cards and even foreign ID cards — and that’s where the trouble comes in. Those are “so easy to replicate these days, and it’s so easy to purchase them, I understand,” said Sweeney.

He is acquainted with federal employees at the Immigration and Customs Enforcement offices around the state because so much of the fraud taking place in the U.S. actually originates overseas. Recently, he worked with ICE on a case where an elderly woman was wiring money to an individual in Jamaica who was romancing her electronically. ICE happens to have an agent in Jamaica precisely because it is the source of much overseas wire fraud.

ICE also focuses on individuals who are in the country illegally, and some large counterfeit check rings have involved crooked Americans hiring illegal aliens to cash the checks for them.

Not all overseas cons target Americans who are in the lonely hearts club. Sweeney worked with one small business owner who had been trying to conduct a business deal with someone in West Africa. The Michigan company had been wiring money to the African connection in the belief that everything was on the up-and-up — and ended up losing tens of thousands of dollars. It was a con, pure and simple.

Luckily for business and consumers alike, Sweeney isn’t the Lone Ranger out there.

“I have counterparts in other financial institutions that do what I do,” he said.

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